Determination letter for defined benefit plan

[Belgarath]

Let's assume an individually designed governmental DB plan received a determination letter at some time in the dim and distant past. I believe post 2017, such a plan could no longer apply for a D-letter, absent a plan termination, merger, or some other unusual situation that I can't recall. 

Has that changed?

[Carol V. Calhoun]

Unfortunately, it has not.  I have said for years that this is something that needs to be changed.  It's one thing to push employers to use pre-approved plans for their standard 401(k) plans.  But no one is developing pre-approved governmental defined benefit plans, if only because the plans have such differing terms and often Constitutional barriers to any changes.  And I have seen governmental plans whose determination letters date from before the Internal Revenue Code of 1954.  Obviously those letters can't exactly be relied upon now, but governmental entities really have no choice. 

[Belgarath]

Thanks Carol. ASC sponsors a pre-approved governmental DB plan in an AA format, but I have not yet compared provision-for-provision to the current IDP DB document to see if it would "fit" onto the ASC frame. Now I don't recall - will the IRS accept a 5307 in this situation, if the changes are not too drastic? Problem is we have a couple of small "legacy" governmental DB plans that are far more trouble than they are worth, but for various reasons just getting rid of them isn't a good option...

Thanks again for any thoughts.

[Carol V. Calhoun]

Alas, I haven't looked at that issue.  The governmental plans I represent tend to be larger ones, with different benefit structures for different job classifications, different benefit structures for people hired during certain time periods, sometimes different contribution options to be chosen at initial hire, different interrelationships with corresponding DC plans, etc., so they would not be amenable to a pre-approved structure.

[Belgarath]

Got it. Thanks for the input!

[Bri]

It's way more fun when you realize the prior TPA your bosses just bought was using ERISA pre-approved documents for governmental plans.

[Carol V. Calhoun]

28 minutes ago, Bri said:

It's way more fun when you realize the prior TPA your bosses just bought was using ERISA pre-approved documents for governmental plans.

For some definition of "fun"... 🤣

[truphao]

On 11/4/2024 at 1:17 PM, Belgarath said:

Thanks Carol. ASC sponsors a pre-approved governmental DB plan in an AA format, but I have not yet compared provision-for-provision to the current IDP DB document to see if it would "fit" onto the ASC frame. Now I don't recall - will the IRS accept a 5307 in this situation, if the changes are not too drastic? Problem is we have a couple of small "legacy" governmental DB plans that are far more trouble than they are worth, but for various reasons just getting rid of them isn't a good option...

Thanks again for any thoughts.

We are in the same boat - trying to restate a few DB plans using ASC - but have not really started yet.  Would be happy to exchange opinions in a couple of weeks.

[Belgarath]

Good luck to both of us! We work with an actuary that does governmental plans, and she was not aware of any companies doing what we are looking for. She inquired of an ERISA attorney about a fee to draft a document (for this 8-person Governmental DB plan) and was quoted $30,000.

[Peter Gulia]

Just curious, how does that proposed fee compare to an experienced third-party administrator’s time, whether billable or nonbillable, for evaluating whether a client’s governmental plan can be accurately stated within an IRS-preapproved document?

Or, might the time it takes to amend a plan without using any IRS-preapproved document be less than the time it takes to work with an IRS-preapproved document?